Healthcare IT Interoperability, EHR interoperability, Hospital Interoperability

Private Payers News

Why Aetna, Humana Argue in Favor of Health Insurance Merger

The two national payers Aetna and Humana claim in legal defense filings that their health insurance merger would cut costs and benefit consumers.

On July 21, the Department of Justice (DOJ) announced during a press conference that they would be filing a lawsuit against two health insurance mergers between Aetna-Humana and Cigna-Anthem. The DOJ claimed that these health insurance mergers would decrease competition and create obstacles for consumers including seniors and working families. However, the defense of Aetna and Humana claims the opposite will be true.

Health Insurance Acquisitions

According to Aetna’s and Humana’s legal defense statements filed in the United States District Court for the District of Columbia,  the health insurance merger would actually benefit “millions of Americans” since it would bring more cost-effective health insurance options for seniors as well as low-income families. Their legal defense argues against the very issues brought forward by the Department of Justice and claims health insurance mergers would, in fact, aid consumers.

Essentially, the argument is that the merger would speed up innovation and the decrease of costs, which would be passed onto the consumer. This is a common argument that has been made by companies undergoing acquisitions in the past. However, the Harvard Business Review has found that prior health insurance mergers have not led to a reduction in consumers’ premium costs and, in fact, these prices may actually increase among both the employer-sponsored market and the public health insurance exchanges.

Nonetheless, Yevgeniy Feyman, a researcher at Harvard T.H. Chan School of Public Health and a fellow with the Manhattan Institute, told Kaiser Health News that, “There's some literature out there that does show that when you have relatively concentrated insurance markets, they tend to keep actual hospital costs down.”

However, despite this, Leemore Dafny, an economist at Harvard Business School, stated: “I don't find any evidence that reduction in provider payment leads to reduction in insurance premiums, and I don't know of any study that does.”

The legal defense of Humana actually states that the health insurance merger supports competition in the health insurance market and will benefit consumers. The defense outlines that Aetna has more experience in managing employer-sponsored healthcare coverage while Humana handles selling Medicare health plans. The argument rests on the two merged companies offering a more broad array of insurance products.

Additionally, Humana claims that the merger would bring more affordable, high quality, and technology-based products while also stimulating innovation. The payer’s legal team also asserts that the acquisition would reduce premiums and cost-sharing while improving networks and benefits.

The defense statement addresses the Department of Justice claim that the health insurance merger would greatly reduce competition in both the Medicare Advantage market and among the public exchanges. The defense stated that this assessment is based on “fundamental misconceptions of the marketplace realities.” According to Humana’s legal defense team, the DOJ lawsuit puts Medicare Advantage as a single market and misses the extra benefits and drug coverage options of “traditional Medicare” and commercial payers.

When the Department of Justice initially announced their plan to file the lawsuit, Principal Deputy Associate Attorney General Bill Baer stated that the health insurance mergers between the four national payers would risk the financial system that is responsible for paying for American healthcare.

Additionally, Baer went on to explain during a press conference that the four payers were “thriving as independent firms” and would survive without the mergers. Essentially, the payers do not need the acquisitions in order to remain in business, Baer said.

Among employers, Anthem and Cigna are already some of the few payers available, he explained. The health insurance mergers would limit the number of health plans available and cut down on competition within the insurance market.

Through the constant competition between these payers, in fact, the costs of premiums have had a downward pressure. Logically, by merging the companies, there would be no check on keeping these insurance costs down, Baer clarified.

“These mergers would fundamentally reshape the health insurance industry. They would leave the top five health insurers in just three mammoth companies,” Attorney General Loretta Lynch stated during the press conference.

“Competition would be substantially reduced for hundreds of thousands of families. These mergers may indeed increase the profits of Aetna and Anthem but they would do so at the cost of families, employers, hospitals, and providers,” Lynch continued. “For most Americans health insurance is not a luxury but a necessity to lead healthy and productive lives. If the big five were to become three, not only would bank accounts of Americans suffer but the Americans themselves.”

The legal defense of Anthem and Humana remains in line with prior statements made by the payers. Soon after the DOJ announced their lawsuit, press releases were published from Aetna, Humana, Cigna, and Anthem. Since July, Aetna and Humana have stated how the insurance merger would benefit consumers including seniors seeking more affordable Medicare Advantage plans. The courts are left to decide whether or not to allow these health insurance mergers to proceed.

 

Dig Deeper:

How Health Insurance Mergers Could Change the Payer Industry

Will Health Insurance Mergers Stifle Market Competition?

  • {tag_name}
  • Become a member

    Complete your profile below to access this resource.

    Thanks for subscribing to our newsletter. Please fill out the form below to become a member and gain access to our resources.

    Reset your password

    Enter your email address to receive a link to reset your password

    X

    Sign up for our free newsletter:

    Our privacy policy

    no, thanks